Debunking Property Auction Finance Myths: A Smarter Way to Buy at Auction

Property auctions have become increasingly popular amongst investors and homebuyers looking for fast deals, below-market prices, and unique opportunities. But, with the rise in interest comes an equal rise in confusion, especially when it comes to financing.

Auction finance is often misunderstood. It’s a powerful tool that allows buyers to secure properties quickly and efficiently, but persistent myths discourage many potential property buyers from exploring this route.

In this article, we’ll break down the most common misconceptions about auction finance and explain what the reality looks like, helping you make better-informed decisions when bidding under the hammer.

Myth 1: You Must Have the Full Purchase Price in Cash

The myth: “You need to show up to the auction room with your full funding already in place.”

The truth: While auctions require swift payment – typically 10% of the purchase price on the day and the remaining 90% within 28 days – you do not need to have the full sum in your bank account upfront. There are a number of specialist lenders available offering auction finance, also known as bridging loans, designed specifically to meet these time-sensitive conditions.

Auction finance can usually be arranged quickly, often in as little as 48–72 hours, making it entirely feasible to rely on a short-term loan to complete the purchase within the deadline. Many seasoned investors use this model to acquire the property with a bridging loan, then refinance to a traditional mortgage or sell the property post-renovation.

Myth 2: Auction Finance Is Too Expensive

The myth: “The interest rates and fees are outrageously high so it’s not worth it.”

The truth: Yes, auction finance is typically more expensive than a standard mortgage with rates typically ranging between 0.5% and 1.5% per month. There may also be arrangement fees, valuation fees, and exit fees to factor in. However, comparing bridging finance to long-term mortgages is not comparable as they serve entirely different purposes.

Auction finance is short-term and purpose-built to let clients unlock time-sensitive opportunities. When used correctly and with a solid exit strategy, the cost becomes a small price to pay for the speed, flexibility, and competitive advantage it offers. For instance, if a developer purchases a property for £150,000, spends £25,000 on renovations, and sells it three months later for £220,000, the finance costs are often outweighed by the gains.

Myth 3: Only Experienced Investors Can Use Auction Finance

The myth: “If you’re not a seasoned developer or investor, lenders won’t consider you.”

The truth: Whilst it’s true that experience can help, it is not a prerequisite. Lenders assess applications based on several factors; the type and condition of the property, your creditworthiness, your exit strategy, and the overall risk profile of the deal.

First-time buyers and novice investors can access auction finance, particularly if they surround themselves with the right support including experienced brokers, legal advisors, and surveyors.

Some lenders even specialise in helping first-time investors or landlords by offering packaged solutions and hands-on support throughout the lending process.

Myth 4: You Can Only Use Auction Finance on Residential Property

The myth: “Auction finance only works for houses you can live in.”

The truth: Quite the opposite! One of the biggest advantages of auction finance is that it can be used on properties that traditional mortgage lenders would avoid, think uninhabitable homes, commercial buildings, mixed-use developments, plots of land, or even dilapidated shells with no working kitchen or bathroom.

Auction finance lenders are more concerned with the value of the asset and the borrower’s plan for it than its livability or immediate mortgage suitability. This opens up a wide spectrum of opportunities for buyers willing to take on more unconventional or value-add projects.

Myth 5: You Need a Perfect Credit Score

The myth: “Bad or average credit means you won’t qualify for auction finance.”

The truth: Auction finance lenders tend to be more flexible than traditional mortgage providers when it comes to credit history. Whilst a strong credit score can certainly help secure better terms, it’s not the only factor in play. In many cases, lenders place greater weight on the property itself, the loan-to-value (LTV) ratio, and the proposed exit strategy.

If you have equity, a reasonable deposit, and a solid plan to repay the loan – either through resale, refinancing, or another asset disposal – there’s a good chance you’ll be considered even with blemishes on your credit file.

Myth 6: The Process Is Too Complicated

The myth: “It’s too complex. Auction finance involves too much paperwork and risk.”

The truth: Whilst there are more moving parts to auction finance than a conventional mortgage, the process is far from insurmountable, especially with a good broker or advisor on your side. Most lenders streamline the process, requiring only essential documents upfront and working to tight deadlines.

What’s more, many auction finance providers offer pre-approval or “decision-in-principle” letters before the auction, giving buyers the confidence to bid with clarity on their budget.

Myth 7: You’re Locked In with No Flexibility

The myth: “If something changes, you’re stuck in a rigid loan with no way out.”

The truth: Auction finance is, by design, flexible. Terms usually range from 1 to 24 months, and many loans are structured with interest-only or rolled-up payments, giving buyers breathing room while adding value or preparing a longer-term refinance.

Additionally, most lenders allow early repayment without penalties or only modest fees, meaning if your exit happens sooner than expected, such as a quicker-than-planned property flip or mortgage approval, you can repay and move on without being penalised heavily.

Action Finance: Knowledge Beats Fear!

Auction finance can seem intimidating at first, but much of the concern comes from misinformation. With the right preparation, a clear plan, and expert support, it can be a powerful tool that levels the playing field for buyers—from first-timers to seasoned investors.

In fact, many successful auction buyers wouldn’t even consider going to the auction room without auction finance as part of their strategy. It’s not just about buying a property quickly; it’s about buying smart, seizing opportunities others are too cautious to touch, and building wealth with speed and precision.

So if you’re considering bidding at auction, don’t let the myths hold you back. Understand your options, speak to a trusted broker, and approach the process with clarity. With a bit of education and the right team, you’ll be better positioned to turn the hammer into your next win.

At Exe Mortgages, we are a team of experienced advisors who arrange auction finance for clients across the country. If you’re exploring your options at purchasing property at auction, get in touch with our friendly team today.